SINGAPORE (May 15): DBS is maintaining its “buy” call on Cityneon with a target price of $1.26 with the possibility of new shareholders coming in to help the events and exhibitions organiser pursue growth, including acquisition of a third Intellectual Property (IP) rights.
Last Friday, Cityneon’s controlling shareholder, Star Media Group, announced it has entered into a conditional sale and purchase agreement with Lucrum 1 Investment, a special-purpose vehicle, to dispose of its entire 52.51% stake in Cityneon for $115.6 million in cash.
(See also: Cityneon receives 90 cents per share pre-conditional offer from Lucrum 1)
Upon completion of the acquisition, Lucrum 1 Investment is obliged to make a mandatory general cash offer for the remaining shares not already owned at 90 cents each. The offer price is at a 5.76% discount to the last trading price of 95,5 cents on May 5.
The shareholders of Lucrum 1 Investment are investors Massive Right Investments, Mutual Power International and Philadelphia Investments which is owned by Ron Tan, Cityneon’s Group CEO and Executive Director.
In a Monday report, analyst Ling Lee Keng says the disposal allows Star Media to unlock its investment in Cityneon, with a disposal gain of $68.7 million.
More importantly, CEO Tan would be able to more effectively influence the strategy, expansion and future direction of Cityneon.
With the support of the new investors, Cityneon will be able to pursue its growth strategy, including acquisition of a third IP rights and expanding its regional footprint for exhibition sets.
“We continue to expect Cityneon to register explosive FY16-FY19F EPS CAGR growth of c.150%, based on its existing two IP rights,” says Ling.
Shares of Cityneon are down 6 cents at 90 cents.
